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Chipotle's new loyalty program offers the best rewards in the market, but there's a catch
Chipotle Facebook
Chipotle is launching a new loyalty program, and it offers some of the best rewards in the restaurant industry, according to BTIG analyst Peter Saleh.
The program, Chiptopia, is designed to appeal to the chain's most frequent guests.
Customers are rewarded for their visit frequency as opposed to dollars spent. They earn free meals after their fourth, eighth, and 11th visits each month.
There are also additional rewards, such as free catering when customers reach certain status levels within the loyalty program.
Chiptopia's rewards trump those offered by most other leading loyalty programs, such as Starbucks' and Dunkin' Donuts' programs, according to Saleh.
For example, it offers about as much as three times the payback per dollars spent than Starbucks' loyalty program.
Saleh writes:
"Relative to other loyalty programs, Chipotle's is very generous with its rewards, offering a free entrée after roughly $35-$40 of spend (note an entrée could be earned after $24). This compares to a reward threshold of $90 of likely spend at Domino's Pizza, $40 at Dunkin' Donuts, and $62.50 at Starbucks."
But there's a catch: The program is only temporary, lasting just three months.
"The program's end in September could alienate some customers just as they are getting accustomed to the rewards," Saleh writes.
But Chiptopia should still have an overall positive effect on sales, according to Saleh.
"Given the generous nature of Chiptopia, we would be very surprised if the program is continued after September, but believe the company could continue a loyalty program in some form if the results are encouraging," Saleh writes.
Chipotle said that it was working on designing a permanent rewards program and would use what it learns from Chiptopia this summer to inform the new program.
The following chart shows how Chiptopia compares to other rewards programs on a dollar-for-dollar basis:
Chipotle Facebook
Chipotle has been spending millions of dollars since February on free-food offers, including direct-mail coupons and mobile offers, to encourage customers to return to its restaurants in the wake of an E. coli outbreak that sent the chain's sales plunging.
The outbreak, which sickened more than 50 people in 14 states, was declared over in February, but Chipotle's sales have yet to bounce back. The chain's same-store sales dropped 30% in the first quarter of the year.
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